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I'd like to calculate the fair market capitalization of the Metropolitan Transportation Authority of New York, or learn how to do so of any comparable public interest corporation (ie an entity without the traditional published financials of a publicly listed corporation).

Facts: According to their Wikipedia page, they have: a daily ridership of 11.5 million According to this NY Post article, the average fare price is $1.29

conclusions: the MTA's daily revenue is is 14.8M, their annual revenue is $5.4B

layman's bad calculation:

comparing Nike's annual operating revenue (from wikipedia) of 2.5 billion and their market capitalization of 40 billion, we extrapolate the factor of 2.16 to determine the MTA's market cap of 86.4 billion.

Yes, this is wrong. Please show me how you would do it. (is there a way to take into account that the MTA is a pseudo monopoly, and as such: 1) gets access to cheap loans if needed from the state, 2) isn't afraid of losing market share to private companies, and as such, is less under fire of losing revenue)

C. Ross
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  • One thing you're missing is the asset base -- I presume MTA owns a lot of capital assets. – bstpierre Apr 07 '11 at 20:28
  • You won't have enough information to calculate it really. There are no publicly traded mass transit agencies in America (to my knowledge) so you can't begin to guesstimate what investors are willing to pay. – Frazell Thomas Apr 07 '11 at 22:04

2 Answers2

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You are on the right track, as it were, but to get even vaguely in the right ballpark you will need to have some decent estimates of some unknowable things, as well as better exemplars of similar companies.

Nike is not a good comparison for an infrastructure-heavy company, their income to expense ratio will be completely different.

Companies that would have a more similar, although perhaps still far away in reality, cost structure are those with large infrastructure costs. I am thinking of perhaps TransCanada Pipeline or BNSF Railroad. Anything with large fixed costs would suffice.

You already have the revenue number, there many be other numbers publicly available if you dig a bit. Union settlements in the newspaper could give you a ballpark on labour costs for example.

Key to the end of this would be if they receive subsidies, or turn a profit. If, like most transit authorities around the world are designed to break even after subsides, then their true market value would drop dramatically.

Shareholders, unless they had a real monopoly and could therefore raise prices to cover expenses, would not generally purchase something that loses money with no hope of turnaround - unless they were planning to sell off the fixed assets and shut down operations.

sdg
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This is an interesting problem. You'd probably valuate it similarly to an electric utility company. Information you'd need:

  • Total fares
  • Total tolls
  • Total state and city subsidy
  • Outstanding debt and payment structure
  • Pension obligations.

You'll probably find that in a market situation, MTA would be worth $0.

The debt structure is tax-free, which artificially lowers the interest rate paid. That tax status wouldn't exist if it were a private entity. The pension obligations of a big NY agency are unfathomably large, and guaranteed by collective bargaining and the State constitution.

So you have high fixed, labor and benefit costs, and solvency is dependent on the mercurial goodwill of the State Legislature, and the ability to extract revenue through transit fares and bridge/tunnel tolls. A tough road to hoe.

duffbeer703
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